I am trying to determine where I tiebreak, I am hoping the wisdom of the crowd can help!
We maintain homes in both US and Canada, we rent in US and own in Canada. I'm not sure if this satisfies the 'permanent home' requirement of para 2 - but am presuming renters aren't left out in the cold, so, next to consider is 'Personal and economic ties'':
I have a job at each of a Canadian and American institution (Can is permanent/paid, US is honorary). The vast majority of my income comes from consulting, however, which in 2012 is 1/3 UK-based and 2/3 US based, none is Canadian based. My wife also splits her time between the US and Canada.
So, based only on income, ties are stronger to the US. But, if home ownership 'counts' as an 'economic tie', then it would seem I tie break to Canada. Physical presence doesn't seem to be part of the test, but we do spend more time in Canada than in he US.
Anyone able to provide further guidance?
Many thanks.
'financial ties' in tiebreak
Moderator: Mark T Serbinski CA CPA
Physical presence DOES count, as to get to the tie-breaker you need to satisfy the IRS substantial presence test, otherwise you are not considered resident in US at all (rememebr, the tie-breaker forst needs you to be considered resident of the 2 countries by their own rule).
So, since you don't meet the IRS definition of US tax resident, you don't get to the tie-brekaer step.
Since you meet the CRA definition of Cdn residentm, and do not meet the IRS definition of US tax resident, You are a Cdn tax resident.
So, since you don't meet the IRS definition of US tax resident, you don't get to the tie-brekaer step.
Since you meet the CRA definition of Cdn residentm, and do not meet the IRS definition of US tax resident, You are a Cdn tax resident.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Well that was big ommission.
However, it still come s down to days, which you say is predominantly in canada, as this becomes your 'habitual' abode (which by the way can be either rented or owned). Finally, your Cdn citzenship would win out.
Nothing in your earlier post (assuming you haven't left anything else out) would point to you having a centre of vital interest in US, since your spouse is in canada.
Your consulting in US, since you do not spend the required time there, is not sufficient a tie to make it your centre of vital interest.
If your goal is to become a deemed non-resident of canada (be careful what you wish for) then at least yoy -- and preferablt your spouse -- should spend more than 183 days per year in US. This would result in loss of provincial healthcare, btw.
However, it still come s down to days, which you say is predominantly in canada, as this becomes your 'habitual' abode (which by the way can be either rented or owned). Finally, your Cdn citzenship would win out.
Nothing in your earlier post (assuming you haven't left anything else out) would point to you having a centre of vital interest in US, since your spouse is in canada.
Your consulting in US, since you do not spend the required time there, is not sufficient a tie to make it your centre of vital interest.
If your goal is to become a deemed non-resident of canada (be careful what you wish for) then at least yoy -- and preferablt your spouse -- should spend more than 183 days per year in US. This would result in loss of provincial healthcare, btw.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
I'm wading through all things, thank you Nelsona.
At present, I pass the SP test for both countries. I am attempting to apply tie break, not fail to pass SP for one of them. My novice reading is that the approach you advocate here would bypass the tie break issue entirely, since being a non-resident of one country means there is no need to tie break. I see no reason that I would lose healthcare if I continue to be a resident of Canada, but file taxes based on the tie breaking to the south - but it's possible (likely!) I am misunderstanding.
As with so many things in our common law system, relying on the text of the test alone is problematic. However, the issue of citizenship seems to come up only in step 4, while I believe that my tie can be broken in step 2. So, my question is, how do I properly evaluate step 2, which deals with personal and economic ties?
Or, perhaps my larger question is, is the tie break process really as separate from SP as I believe that it is? I note for example that there is no mention of 'habitual abode' in the actual text of the test, so perhaps this comes from common law. The only step I see for residence is in step 1 which requires to pass SP and a permanent residence in both countries (Check!).
At present, I pass the SP test for both countries. I am attempting to apply tie break, not fail to pass SP for one of them. My novice reading is that the approach you advocate here would bypass the tie break issue entirely, since being a non-resident of one country means there is no need to tie break. I see no reason that I would lose healthcare if I continue to be a resident of Canada, but file taxes based on the tie breaking to the south - but it's possible (likely!) I am misunderstanding.
As with so many things in our common law system, relying on the text of the test alone is problematic. However, the issue of citizenship seems to come up only in step 4, while I believe that my tie can be broken in step 2. So, my question is, how do I properly evaluate step 2, which deals with personal and economic ties?
Or, perhaps my larger question is, is the tie break process really as separate from SP as I believe that it is? I note for example that there is no mention of 'habitual abode' in the actual text of the test, so perhaps this comes from common law. The only step I see for residence is in step 1 which requires to pass SP and a permanent residence in both countries (Check!).
So many issues:
Habitual abode is in the treaty text.
SPT doesn't apply to you as a GC holder, you meet tha test automatically, and there is no SPT test for canada, it is strictly based on residential ties, which you have.
It is your days in canada that are the 'problem': "we do spend more time in Canada than in he US"
Until you reverse this, you remain a Cdn resident. Once you reverse this, you become a deemed non-resident (which is the same as a non-resident), which also means giving up prov healthcare, DL, etc.
Economic 'tie' is not as important as where you sleep. After all you could work every day in detroit, with an appartment there, and return and live in canada 4 nights a week, in which case you would be a Cdn resident. Look at it the other way: would a Cdn pensioner with no US income NEVER be able to become a US tax resident?
There is a differnce in determining what is taxable in US (ie US-sourced) and whether you are resident there.
As to healthcare, ALL provinces but 1 require you to maintain physical presence in canada 183 days (which makes you Cdn tax resident). Ontario requires only 151, but stipulates that you remain Cdn tax resident.
You cannot be physicallly in canada 183 days and have a permanent abode there and NOT be considered resident (either factual or deemed), Only if you reduce your days in canada will you be able to become non-resident.
You are quite free to submit an NR-73 to CRA and ask for adetermination. My advice, if you want to klive in US and give up medicare, it to simply live more in US (which is a condition of your GC by the way -- another issue).
Habitual abode is in the treaty text.
SPT doesn't apply to you as a GC holder, you meet tha test automatically, and there is no SPT test for canada, it is strictly based on residential ties, which you have.
It is your days in canada that are the 'problem': "we do spend more time in Canada than in he US"
Until you reverse this, you remain a Cdn resident. Once you reverse this, you become a deemed non-resident (which is the same as a non-resident), which also means giving up prov healthcare, DL, etc.
Economic 'tie' is not as important as where you sleep. After all you could work every day in detroit, with an appartment there, and return and live in canada 4 nights a week, in which case you would be a Cdn resident. Look at it the other way: would a Cdn pensioner with no US income NEVER be able to become a US tax resident?
There is a differnce in determining what is taxable in US (ie US-sourced) and whether you are resident there.
As to healthcare, ALL provinces but 1 require you to maintain physical presence in canada 183 days (which makes you Cdn tax resident). Ontario requires only 151, but stipulates that you remain Cdn tax resident.
You cannot be physicallly in canada 183 days and have a permanent abode there and NOT be considered resident (either factual or deemed), Only if you reduce your days in canada will you be able to become non-resident.
You are quite free to submit an NR-73 to CRA and ask for adetermination. My advice, if you want to klive in US and give up medicare, it to simply live more in US (which is a condition of your GC by the way -- another issue).
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
aAs an incentive for keeping Cdn residency (othe than healthcare) realize trhat your contractor work in US would beome subject to 13% SE tax if you live in US. It is not now, and is only subject to CPP, which is a considerable savings.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
All very useful, thank you Nelsona.
Just out of curiosity: it strikes me that most of what you have written here is about avoiding a situation where the tie break would need to be applied. Just to help my understanding, can you give an example of a circumstance in which the tie break would actually be exercised?
It sounds like one would need to literally spend 182 nights in each of the US and Canada in a given year to be in a "tie" - does anyone actually thread that needle?
Just out of curiosity: it strikes me that most of what you have written here is about avoiding a situation where the tie break would need to be applied. Just to help my understanding, can you give an example of a circumstance in which the tie break would actually be exercised?
It sounds like one would need to literally spend 182 nights in each of the US and Canada in a given year to be in a "tie" - does anyone actually thread that needle?
My scenarios I presented ALL use the tie-breaker. The only way you don't use the tie-braeker is if you break your Cdn residential ties (house and spouse).
You see, canada doesn't use days to determine tax residency. It uses ties. It's only by the treaty that one can say "sure, I'm a Cdn resident by CRA rules, but I'm also US resident by US rules, AND all my ties when looked at in whole show that I'm a US resident by treaty rather than a Cdn resident.' Deem me a non-resident, please.
You don't make that case, from what you presented.
If this discussion was about Canada and say Cayman Islands, you could never break Cdn tax residency, by virue of the fact you have a residence in canada --even if you neer set foot in canada -- because there is no treaty.
But for US and most other treat counties you actually have 2 ways to break it: stay more in US than canada, or give up your Cdn abode (ie. rent it out non arm's length). This would be the only way you make your case for non-resident.
You see, canada doesn't use days to determine tax residency. It uses ties. It's only by the treaty that one can say "sure, I'm a Cdn resident by CRA rules, but I'm also US resident by US rules, AND all my ties when looked at in whole show that I'm a US resident by treaty rather than a Cdn resident.' Deem me a non-resident, please.
You don't make that case, from what you presented.
If this discussion was about Canada and say Cayman Islands, you could never break Cdn tax residency, by virue of the fact you have a residence in canada --even if you neer set foot in canada -- because there is no treaty.
But for US and most other treat counties you actually have 2 ways to break it: stay more in US than canada, or give up your Cdn abode (ie. rent it out non arm's length). This would be the only way you make your case for non-resident.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best